This case was before the court for consideration of the parties’ Joint Statement regarding restrictions on communications with putative class members, as required by L.R. 23.1(C)(2) of the Northern District of Georgia.

The specific issue raised by the parties’ Joint Submission was explained as follows:

In the Joint Statement, Plaintiffs raise a concern that Defendants will question putative class members about a policy requiring employees to lodge contemporaneous internal complaints about incorrect pay (“Complaint Policy”). Plaintiffs fear that if representatives of Defendants raise the Complaint Policy in communications with putative plaintiffs, the putative plaintiffs will believe that their failure to have lodged a contemporaneous complaint about incorrect pay may have been a violation of company policy that could result in their termination from employment. In its portion of the Joint Statement, Defendants do not deny an intention to make such inquiries of employees.

Initially the court discussed the basic applicable law:

[A]n order limiting communication between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of a need for limitation and the potential interference with the rights of the parties. Only such a determination can insure that the court is furthering, rather than hindering, the policies embodied in the Federal Rules of Civil Procedure, especially Rule 23.

Based on its conclusion that there were inherent risks in the anticipated questioning by the defendants, the court held that the defendants were barred from communicating with former employee putative class members regarding the subject matter of the case, outside of the regular discovery process in the case and without the consent of plaintiff’s counsel. While the court permitted defendants’ counsel to speak with current employees who were putative class members, it set forth detailed prerequisites prior to any such communications, in order to safeguard against defenadnts’ improperly influencing putative class members from exercising their rights under the FLSA:

The Court finds that the risks inherent in the anticipated questioning by Defendants warrant the following limitations on Defendants’ communications with potential class members.

There shall be no communications with any named Plaintiff or with any current or future opt-in Plaintiffs outside the formal discovery process or without the consent of the named Plaintiff’s counsel of record, except-as to any currently employed present or future opt-in Plaintiff-for routine business matters unrelated to this action.

With respect to any presentation of information, including any views or opinions, to any “putative class members” by the Defendants—whether acting through management, counsel, other employees, or any other agent of any kind—that relates to the allegations and claims in this action, whether for the purpose of gathering information in a one-on-one or group basis to defend this action or to address any employee complaints regarding past, current or future compensation practices, such communication shall commence with the following statements:

(a) The person(s) present on the Defendants’ behalf is a Defendant employee or agent acting at the direction of Defendants’ management;

(b) The person(s) present on the Defendants’ behalf is there to address a lawsuit filed against the Defendants, as well as employee complaints, involving allegations that the Defendants failed to pay employees all the wages and overtime they had earned and were entitled to receive;

(c) The lawsuit is a class-action—which means the individual may receive money as a result of the lawsuit;

(d) The allegations of wrongdoing (accurately stated), accompanied by a copy of the Third Amended Complaint;

(e) The “putative class member” is under no obligation to stay, or listen, or speak, or respond;

(f) No record of anyone who does not stay, speak, or respond is being made and no record of who does not stay, speak, or respond will be made at any future time;

(g) No adverse action will be taken if the “putative class member” chooses not to stay, speak, or respond;

(h) No adverse action will be taken if the “putative class member” says, in substance, they believe they not were not properly compensated or did not receive all compensation owed to them, whether or not they complained to anyone about any compensation issues; and

(i) The “putative class member” is free to leave at any time, including at this point.

While the procedural posture of this case was somewhat unique, in that the Northern District of Georgia has a detailed/explicit rule regarding pre-certification communications (and there was a Rule 23 class claim in addition to the FLSA collective action claim), this decision will likely serve as a blueprint for many courts going forward, given the chilling effect unilateral meetings with current and former employees can have, as many courts have previously noted.

As more and more circuit courts come into conformity and hold that so-called hybrid actions—where employees seek to certify state law claims as opt-out class actions, along with seeking to certify opt-in FLSA collective actions—are permissible, each such decision becomes less notable on its own. However, because employers continue to argue that such hybrids raise so-called incompatible issues in circuits where the issue remains undecided, this recent case from the Ninth Circuit is an important one.

In this case, the plaintiff-employees brought a putative class action against their former employer, alleging violations of the Fair Labor Standards Act (FLSA) and Nevada labor laws. Citing the incompatibility of the state-law claims, the District Court granted the defendant-employer’s motion to dismiss same. The plaintiff-employees appealed and the Ninth Circuit reversed and remanded, holding that, as a matter of first impression, a FLSA collective action and a state law class action could be brought in the same federal lawsuit.

Agreeing with the other circuit court’s to have already decided the issue, the Ninth Circuit reasoned:

Our sister circuits have correctly reasoned that FLSA’s plain text does not suggest that a district court must dismiss a state law claim that would be certified using an opt-out procedure. Its opt-in requirement extends only to “any such action”—that is, a FLSA claim. See29 U.S.C. § 216(b); Knepper, 675 F.3d at 259–60 (noting Section 216(b) “explicitly limits its scope to the provisions of the FLSA, and does not address state-law relief”); Ervin, 632 F.3d at 977 (“Nothing” about FLSA’s text “suggests that the FLSA is not amenable to state-law claims for related relief in the same federal proceeding.”). FLSA also expressly permits more protective state labor laws. See29 U.S.C. § 218(a) (“No provision of this chapter … shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter or a maximum work week lower than the maximum workweek established under this chapter….”). This savings clause provides further evidence that a federal lawsuit combining state and federal wage and hour claims is consistent with FLSA. See Ervin, 632 F.3d at 977;Shahriar, 659 F.3d at 247–48.

Nor does the legislative history of Section 216(b) support the view of some district courts that allowing both actions to proceed simultaneously “would essentially nullify Congress’s intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b)‘s opt-in requirement.” Otto v. Pocono Health Sys., 457 F.Supp.2d 522, 524 (M.D.Pa.2006), overruled by Knepper, 675 F.3d at 253–62. We agree with the Third Circuit that the “full legislative record casts doubt” on the contention that Section 216(b) was intended to eliminate opt-out class actions. Knepper, 675 F.3d at 260;see also Ervin, 632 F.3d at 977–78;Shahriar, 659 F.3d at 248. When Congress created Section 216(b)‘s opt-in requirement as part of the Portal–to–Portal Act of 1947, it was responding to concerns about third parties filing “representative” FLSA actions on behalf of disinterested employees. See Hoffman–La Roche, 493 U.S. at 173. Accordingly, it amended FLSA “for the purpose of limiting private FLSA plaintiffs to employees who asserted claims in their own right and freeing employers of the burden of representative actions.” See id.

This purpose does not evince an intent to eliminate opt-out class actions for state wage and hour claims brought in federal court. Even if it did, Congress has expressed a contrary intent in the Class Action Fairness Act of 2005, which confers federal jurisdiction over class actions where certain diversity and amount-in-controversy requirements are met. See Class Action Fairness Act of 2005, Pub.L. No. 109–2, 119 Stat. 4. Because the Class Action Fairness Act provides that federal courts should exercise jurisdiction over certain class actions (including those alleging violations of state wage and hour laws), and these class actions are certified pursuant to Rule 23‘s opt-out procedure, we cannot conclude that Congress intended such claims be dismissed simply because they were brought in conjunction with FLSA claims.

While no longer groundbreaking, it is still significant that an issue once very much uncertain is further clarified by this decision.

In this case, the claimant-employees had initially filed their case as a class/collective action in federal court. Pursuant to arbitration agreements that the plaintiffs had signed during their employment, the defendant successfully moved to compel the plaintiffs to pursue their claims in arbitration. Because the arbitration agreement at issue called for arbitration pursuant to the American Arbitration Association’s (AAA) rules governing arbitration, the plaintiffs successfully argued that a Rule 23 type opt-out mechanism rather than 216(b)’s opt-in governed as the appropriate class mechanism. Twelve (12) days after the arbitrator’s holding that an opt-out class procedure would govern, the defendant began requiring all current employees to sign a new arbitration clause, which if enforced, would have precluded the current employees from participating in the putative class action, yet to be certified. Arguing that the respondent-employer’s unilateral effort to defeat putative class members’ participation in the arbitration required thorough remedial measures, the claimant-employees moved for a protective order and temporary restraining order to:

(1) Enjoin any further dissemination of the letter to current employees with the class-waiver form; (2) Enjoin any effort by the respondent-employer or its counsel to chill participation in the case, including prohibiting any further unauthorized communication with any class members concerning joining the case, except as approved by the arbitrator; (3) Enjoin retaliation by [Waterstone] against any individual participating in the case; (4) Direct that [Waterstone] (in a form and manner supervised by the Arbitrator or on consent of claimants’ counsel) promptly notify all class members who received Exhibits A and B of the impropriety of [Waterstone’s] acts and the invalidity of the waivers it solicited; (5) Sanction [Waterstone] with monetary relief for its improper behavior [ ] so that [Waterstone] does not achieve any of the benefit of chilling individuals from participating in this case; (6) Reserve the opportunity for individuals to join the case post-judgment, should they opt-out now, given their employer’s clear statement of its desire that they not join this case; (7) Award Claimant’s costs and attorneys’ fees for the time spent on the motion; [and] (8) Award such further relief in the future, as may become necessary to remedy the ill effects of [Waterstone’s] improper behavior.

In opposition, the respondent-employer argued that the motion should be denied because: (1) the arbitrator lacked jurisdiction over the issue presented, because the parties had not agreed to arbitrate the issue of the permissibility of the subsequent class-waivers; (2) it was procedurally improper, because a class or collective action had yet to be certified; and (3) the employees had not demonstrated the requisite irreparable harm to warrant the relief sought.

It is true that a class has not yet been certified. Indeed, the clause-construction award that contemplates a class arbitration may itself be vacated by the District Court. However, even if the motion to certify a class should be denied, or if the Court should vacate the clause-construction award, the arbitration may continue as a collective proceeding (opt in) as a result of Judge Crabb’s direction that Herrington “must be allowed to join other employees to her case.” (D. Ct. Decn. at 18).

The arbitrator similarly rejected the argument that the relief sought was premature:

Whether a proceeding continues as a class procedure or a collective procedure, it must be protected from coercive or misleading communications that are designed to, or have the effect of, persuading or intimidating potential claimants to withhold their participations. The law realistically recognizes that such improper communications may be just as effective pre-certification as post-certification. Therefore, it is within the jurisdiction – indeed, it is the duty – of the judge or arbitrator before whom such a proceeding is pending to protect the integrity of the proceeding and to require that all information conveyed by the parties to potential class members about the proceeding be accurate, not coercive, and not misleading.

Waterstone’s argument that control over communications cannot arise until a class is certified is simply wrong. The power (jurisdiction) to control the parties’ communications to class members or putative class members can arise at least as early as when the initial pleading is filed. See, e.g. Hoffman-LaRoche at 487 (“[I]t lies within the discretion of a district court to begin its involvement early at the point of the initial notice.”).

The arbitrator added:

Waterstone’s contention that it has “has never consented to arbitrate its management decisions as to the nature and form of employment agreements with employees who are not parties to this case” (Jurisd. Memo at 1) assumes that this arbitration is about what kind of dispute resolution provision going forward Waterstone may provide in its form employment agreement. The assumption is false. Herrington brought this arbitration to recover past minimum wages and overtime compensation allegedly due to her and to her fellow employees. Jurisdiction over that claim was established with the filing of the demand for arbitration, and it is the duty of the arbitrator to preserve and protect the integrity of the proceedings with respect to that claim. The entire dispute that is subject to this arbitration is therefore to be resolved under the dispute resolution provisions of the pre-Amendment employment agreement that governs Herrington’s claims.

Instead, the arbitrator held that once the proceeding had commenced, the employer-respondent could not require the potential class members to waive their rights to participate in the case, as members of the class:

However, whatever may be the legality or enforceability of either Option A or Option B in future disputes that might arise between Waterstone and its mortgage-loan employees, those amendments can have no impact on this Herrington arbitration or on the employee class’s rights or choices in it. Once Herrington commenced her arbitration under the original arbitration clause in the employment agreement, Waterstone could not change the nature or course of this pending arbitration by requiring the putative claimants in this proceeding to agree to an entirely different dispute-resolution regime. This arbitration must, therefore, continue under the Agreement that governed when it was commenced, the Agreement that Waterstone, itself, argued successfully to the District Court requires Herrington’s dispute to be arbitrated.

Thus, the arbitrator granted the claimant-employees’ their requested relief.

Although all circuit courts that have taken up the issue have held that so-called hybrid wage and hour cases- comprised of both opt-in collective actions (FLSA) and opt-out class action (state wage and hour law)- are permissible, some courts within the Third Circuit continue to hold otherwise. As a result, not surprisingly, defendant-employers in such cases continue fighting the class action components of such cases on “inherent incompatibility” grounds. Such was the case here, where the court had previously conditionally certified the FLSA claims, but denied plaintiffs related motion for class certification of Pennsylvania Minimum Wage Act (“PMWA”) claims on compatibility grounds. However, in what may become a frequently cited case going forward, the plaintiffs took the logical next step and asked the court to dismiss the PMWA claims so they could re-file them in state court alone, where there would be no issue of compatibility. Not surprisingly, the defendants then threw up their arms, essentially arguing that the plaintiffs should not be able to bring their class claims in federal court and therefore not be able to proceed as a class in any venue. The court rejected the defendants argument, permitting the voluntary dismissal of the state law claims to be pursued separately in state court.

After reviewing the applicable standards under Rule 41, the court granted plaintiffs’ motion for voluntary dismissal of the PMWA claims. The court reasoned:

“Here, defendants have already filed an answer and do not stipulate to the dismissal. Therefore, the court must weigh the equities and decide whether to enter an order of dismissal. Defendants do not assert, and the court cannot ascertain, that they would suffer any plain legal prejudice as a result of dismissal of Watson’s claims. Watson’s intent to re-file a PMWA claim in state court is not plain prejudice. Pouls, 1993 WL 308645, at *1.

Upon weighing the factors set forth in Pouls, we conclude that it is appropriate to grant Watson’s motion to voluntarily dismiss her case. Defendants are not prejudiced by their efforts and expenses in this litigation, because other opt-in plaintiffs remain and the instant suit will continue. Defendants have failed to identify any efforts or expenses unique to Watson. Similarly, the progression of the litigation and Watson’s diligence in moving for dismissal are not determinative factors, due to the ongoing nature of the collective action suit. Consideration of the final factor, the duplicative or excessive expense of subsequent litigation, yields some possibility of prejudice to defendants. If Watson does file a PMWA case in state court and if defendants successfully remove it to federal court, defendants might incur some duplicative expenses in future federal court litigation on issues of claim incompatibility. However, at this time, such expenses are highly speculative. Therefore, we do not find plain prejudice to defendants based on duplicative expenses.

Accordingly, because there is no plain legal prejudice and because the equities weigh in favor of dismissal, we will grant plaintiff Watson’s motion to dismiss her claims without prejudice to her right to refile these claims in state court. An appropriate order follows.”

With the issue of permissibility of so-called hybrids up at the Third Circuit right now it will be interesting to see if this decision gains legs in its trial courts. For now however it is safe to say that defendants in so-called hybrid cases should be careful what they wish for in seeking dismissal of state classes, because two is not always better than one.

In one of the first decisions, post-Dukes, to clarify what affect the Supreme Court’s recent decision will have on conditional certification of FLSA cases, the answer appears to be not much.

In Dukes, the Supreme Court held that the trial court had inappropriately certified a class of over a million women employed by Wal-mart, based on claims of gender bias. The Supreme Court reasoned that the plaintiffs had not met their burden to demonstrate the requisite commonality required by FRCP 23. In the wake of Dukes, there was much speculation as to whether courts would extend the reasoning in Dukes to cases seeking conditional certification of collective actions under 216(b) of the FLSA. In one of the first decisions rendered on this issue, the answer appears to be a resounding no.

This case was before the court on the defendant’s motion seeking reconsideration of the court’s prior order conditionally certifying a class of drivers employed by defendant. Plaintiffs alleged that defendant, a trucking company, improperly misclassified all of its drivers as independent contractors, when they were really employees. Holding that plaintiffs had met their lenient burden of proof as so-called stage one, the court conditionally certified a nationwide class of drivers, all of whom had been classified as independent contractors. Following the Duke’s decision, the defendant sought reconsideration of the order conditionally certifying the class. Denying the motion, the court explained that the differences between FRCP 23, the class action provision under which Dukes was decided and 216(b), the opt-in provision for FLSA collective actions render Dukes inapplicable in the context of an FLSA collective action. As such, the court denied defendant’s motion.

The court reasoned:

“The instant case is a collective action brought pursuant to the FLSA, 29 U.S.C. § 216(b). Unlike Rule 23 class actions. the FLSA requires collective action members to affirmatively opt in to the case. See§ 216(b). To determine whether the proposed group of plaintiffs is “similarly situated,” and therefore qualified to proceed as a conditional collective action, a district court applies a two-step test. See Smith v. Sovereign Bancorp, Inc., No. 03–2420, 2003 U.S. Dist. LEXIS 21010 (E.D.Pa. Nov. 13, 2003). In the first step, which is assessed early in the litigation process, the plaintiff at most must make only a “modest factual showing” that the similarly situated requirement is satisfied. See Bosley v. Chubb Corp., No. 04–4598, 2005 U.S. Dist. LEXIS 10974, at *7–9 (E.D.Pa. Jun. 3, 2005). The Plaintiffs have made this modest factual showing, and this Court’s analysis is not affected by Dukes. The second step of the collective action certification process will be conducted at the close of class-related discovery, at which time this Court will conduct “a specific factual analysis of each employee’s claim to ensure that each proposed plaintiff is an appropriate party.” Harris v. Healthcare Servs. Grp., Inc., No. 06–2903, 2007 U.S. Dist. LEXIS 55221, at *2 (E.D.Pa. Jul. 31, 2007). At this second stage, AEX may argue that Dukes‘s analysis of what constitutes a “common question” is persuasive to this Court’s analysis of whether an FLSA collective action should be certified. In the interim, AEX’s motion for reconsideration is denied.”

This matter was before the Court on the motion of Plaintiffs to sever and remand all state wage and hour claims pursuant to Fed.R.Civ.P. 21. In denying Plaintiffs’ motion, the Court discussed, at length the state of Third Circuit law applicable to so-called hybrid (state law and FLSA) cases.

Unlike many cases within the Third Circuit to have considered the viability of hybrid Wage and Hour cases, in this case it was the Plaintiffs arguing that State Law claims and FLSA claims were “inherently incompatible.” Rejecting this oft-raised argument the Court explained:

In this case, the factors all weigh against severance at this time. With regard to the first two factors, it is clear that both Plaintiffs’ state and federal claims arise from and are predicated upon the same set of core facts. Specifically, both claims are based on the fact that Defendants allegedly failed to pay its employees for overtime or off-the-clock hours worked, failed to provide the required minimum wage, and took unauthorized deductions from employee wages. As to the third factor, severance of the state claims would require the parties to litigate parallel cases with duplicative discovery, thereby frustrating judicial economy. Fourth, there is no indication that any of the parties would be prejudiced by not severing Plaintiffs’ state law claims at this time. Finally, there is no indication that the state and federal claims would require different witnesses or documentary proofs.

Although Plaintiffs have raised a number of arguments in support of their position that the claims should be severed, all are without merit. First, Plaintiffs argue that their state law claims should be severed and remanded in this case because “an FLSA opt-in collective action and a state law wage and hour opt-out class action are ‘inherently incompatible.’ “ (Pl. Br. at 3.) However, this is not an accurate statement of the law. Although Plaintiffs cite to De Asencio v. Tyson Foods, Inc., 342 F.3d 301 (3d Cir.2003) in support of their argument, this case does not stand for that proposition. To the contrary, the Third Circuit’s holding in De Asencio was premised on a case-specific analysis of supplemental jurisdiction, and not any alleged incompatibility between Rule 23 class actions and FLSA collective actions. See342 F.3d at 312. Plaintiffs have failed to cite to any case in which the state class action claims were dismissed on the basis of their alleged inherent incompatibility with FLSA claims.

Second, Plaintiffs argue that the differences between the opt-in nature of their FLSA collective action and the opt-out nature of their state law class action warrants severance of the state law claim. However, the Court finds the procedural differences between the state and federal claims to be outweighed by the common questions of fact and substantive law. See De Asencio, 342 F.3d at 307-312 (noting that bringing state law class action in same case as FLSA claim “may be proper strategy where the state and federal actions raise similar issues and require similar terms of proof”); Cannon v. Vineland Hous. Auth., 627 F.Supp.2d 171, 176 n. 4 (D.N.J.2008) (noting that FLSA and New Jersey wage and hour laws employ same test for overtime claims).

Third, Plaintiffs argue that denial of the motion will prejudice them by delaying both class certification and the speedy trial of their state claims by a state court should this Court decline to exercise supplemental jurisdiction at some point in the future. However, the Court can conceive of no reason why the presence of both state and federal claims in this action would prevent Plaintiffs from seeking to certify the class in a timely manner. Indeed, since filing the instant motion Plaintiffs have moved to conditionally certify the class for their state claims. Further, any hypothetical delay Plaintiffs might suffer should the Court decline supplemental jurisdiction at some point in the future is outweighed by the very real prejudice of having to conduct parallel state and federal court actions with expensive, duplicative discovery that Defendants would face were this motion granted. Plaintiffs contention that Defendants would not be prejudiced by severing the state claims because any duplicative discovery, additional expense, or inconsistent results could have been avoided if they declined to remove the case is likewise unavailing. Plaintiffs have not cited any authority to suggest that a defendant waives its right to argue that it would be prejudiced by an action simply by exercising its right to remove a case involving a federal question.

Finally, Plaintiffs argue that the state claim should be severed because it will substantially predominate the FLSA claim. This argument implicates the Court’s exercise of supplemental jurisdiction over Plaintiffs’ state claim. District courts have supplemental jurisdiction over any claims that share a “common nucleus of operative fact” with a claim over which they have original jurisdiction. See28 U.S.C. § 1367(a); De Asencio, 342 F.3d at 307-312. The courts may nonetheless decline to exercise supplemental jurisdiction if “the state law claim substantially predominates over the claim or claims over which the district court has original jurisdiction.” 28 U.S.C. § 1367(c)(2). Generally, a state claim will be found to substantially predominate where it “ ‘constitutes the real body of a case, to which the federal claim is only an appendage’-only where permitting litigation of all claims in the district court can accurately be described as allowing a federal tail to wag what is in substance a state dog.” Borough of W. Mifflin v. Lancaster, 45 F.3d 780, 789 (3d Cir.1995) (quoting United Mine Workers v. Gibbs, 383 U.S. 715, 727 (1966)); see also De Asencio, 342 F.3d at 309. In such instances, “the state claims may be dismissed without prejudice and left for resolution to state tribunals.” Gibbs, 383 U.S. at 726.

The Third Circuit has made clear that in examining supplemental jurisdiction over state wage and hour claims brought alongside an FLSA collective action:

[a] court must examine the scope of the state and federal issues, the terms of proof required by each type of claim, the comprehensiveness of the remedies, and the ability to dismiss the state claims without prejudice to determine whether the state claim constitutes the real body of the case. This is necessarily a case-specific analysis. De Asencio, 342 F.3d at 312. This analysis may only be conducted after the parties have completed substantial discovery, the opt-in procedure is completed, and the plaintiffs move for class certification of their state claims. See id. at 309-312.

In this case, the opt-in procedure for Plaintiffs’ FLSA claim has not been completed and discovery is ongoing. Further, although Plaintiffs have moved for conditionally certify the state law class, this motion is still pending before the Court. Accordingly, it is premature for the Court to consider whether Plaintiffs’ state law claim substantially predominates over its FLSA claim such that the Court should decline supplemental jurisdiction. Plaintiffs’ argument on this issue is therefore not a proper basis for severance at this time.”

Plaintiff pled this lawsuit for overtime benefits as a “collective action” under the Fair Labor Standards Act (“FLSA”). That is, he purported to act on behalf of himself and “other employees similarly situated” pursuant to 29 U.S.C. § 216(b). After one supposedly “similarly situated” party opted in to the case, Defendants presented both that person and Plaintiff with offers of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. The opt-in party previously accepted the offer and was no longer part of the case; Plaintiff rejected the offer, but did not dispute that it was adequate to cover his damages. Defendants then moved to dismiss the suit on grounds that the Rule 68 offer mooted Plaintiff’s claim. However, since that time, other parties opted into the action and seeking to have their claims resolved as part of a “collective action” with Plaintiff. Denying, Defendants’ Motion to Dismiss on mootness grounds, the Court discussed the remedial purposes of the FLSA’s collective action mechanisms.

Discussing Rule 68 initially, the Court reasoned, “[n]othing in the text of Rule 68 compels dismissal of a case for lack of subject matter jurisdiction when a plaintiff rejects an adequate offer of judgment. Rather, the Rule creates what amounts to a penalty scheme when a plaintiff moves forward with litigation despite being offered the maximum damages she can hope to obtain at trial. “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.” Fed.R.Civ.P. 68(d). Of course, as a practical matter, in some circumstances a Rule 68 offer may “eliminate[ ] a legal dispute upon which federal jurisdiction can be based,” because “[y]ou cannot persist in suing after you’ve won.” Greisz v. Household Bank (Illinois), N.A., 176 F.3d 1012, 1015 (7th Cir.1999). But this does not transform Rule 68 into an escape hatch from every lawsuit. Rather, as this case makes clear, whether a controversy becomes moot following a Rule 68 offer depends on the factual circumstances, the cause of action, and the procedural status of the claims at issue. Moreover, nothing in Rule 68 itself suggests that it should be used as a vehicle for sabotaging claim-aggregating devices like 29 U.S.C. § 216(b) and Rule 23. See Fed.R.Civ.P. 1. (explaining that the Federal Rules of Civil Procedure should be “construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding”).”

The Court then distinguished a 216(b) collective action, from a Rule 23 class action:

“The Court agrees with Judge Almond that Cruz v. Farquharson, 252 F.3d 530, 533 (1st Cir.2001), in which the First Circuit approved the dismissal of a Rule 23 action as moot, is distinguishable. Cruz emphasized that between the date the plaintiffs in that case received “complete relief,” and the date the district court dismissed the case as moot, “no new plaintiffs tried to intervene, and the named plaintiffs made no effort to amend their complaint to add new parties.” Cruz, 252 F.3d at 533. That is not so here. Four additional parties have, in fact, “tried to intervene” as “similarly situated” plaintiffs by submitting their consents for the Plaintiff to pursue claims on their behalf.

Defendants contend that the opt-ins cannot be considered “plaintiffs” or “parties” to the suit for purposes of any exception to mootness carved out by Cruz. See Cruz, 252 F.3d at 533. Cruz stressed that there had been no “decision on class certification” under Rule 23, appearing to require a formal grant of class status in order to preserve a controversy after named parties obtain full relief. Here, the case has not yet reached the equivalent stage in the § 216(b) context: “preliminary collective action certification,” which requires an initial demonstration that the plaintiff “is ‘similarly situated’ to the other members of the proposed class.” Poreda v. Boise Cascade, L.L.C., 532 F.Supp.2d 234, 238 (D.Mass.2008). In the absence of preliminary certification, Defendants argue, Plaintiff has no procedural right to act on behalf of purported “similarly situated” parties. “[A] § 216(b) plaintiff … presents only a claim on the merits …. [and][i]n contrast to the Rule 23 plaintiff, a § 216(b) plaintiff has no claim that he is entitled to represent other plaintiffs.” Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240, 1249 (11th Cir.2003).

In other words, Defendants insist, without the only safe harbor arguably warranted by Cruz-collective action status-this lawsuit died the moment that Plaintiff rejected his Rule 68 offer. At that time, there were no other opt-ins with live claims, and plaintiff had no right to stand in for anyone else. Later opt-ins could not resurrect the action once it expired.

The Court recognizes that Cruz may create some tension with the underlying rationale for decisions allowing § 216(b) opt-ins to preserve jurisdiction. As explained by the Fifth Circuit in Sandoz, at bottom those cases rest on what is known as the “relation back” doctrine. See Sandoz, 553 F.3d at 921;see, e.g., Yeboah, 2007 WL 3232509, at *3 (citing Weiss v. Regal Collections, 385 F.3d 337, (3d Cir.2004), a Rule 23 case dealing with the “relation back” doctrine). Sandoz acknowledged the quandary raised by Cameron-Grant: a named FLSA plaintiff “cannot represent any other employees until they affirmatively opt in to the collective action.” Sandoz, 553 F.3d at 919 (citing Cameron-Grant, 347 F.3d at 1249.). “If our analysis stopped there,” the court reasoned, “[the plaintiff’s] case would be moot,” because she had received an adequate offer of judgment before any opt-ins joined the case. Id. Nevertheless, the court cited Sosna v. Iowa, 419 U.S. 393 (1975), as providing a solution. There, the Supreme Court observed that a Rule 23 controversy might become moot “before the district court can reasonably be expected to rule on a certification motion.” Id. at 402 n. 11. Depending on the circumstances, in such instances class certification might “be said to ‘relate back’ to the filing of the complaint,” which would preserve jurisdiction. Id. at 402 n. 11.Sandoz found that the “relation back” doctrine was just as appropriate for § 216(b) as Rule 23, because both types of actions were vulnerable to strategic mooting by Defendants. Accordingly, “there must be some time for a[n FLSA] plaintiff to move to certify a collective action before a defendant can moot the claim through an offer of judgment.” Sandoz, 553 F.3d at 921.

Defendants fairly point out that Cruz did not approve of such an approach to Rule 23, and in fact took a narrow view of Sosna. The holding in Sosna was that jurisdiction did not disappear when a named plaintiff’s claim became moot after certification of a class with live controversies. Sosna, 419 U.S. at 402. Cruz stated outright that the “holding in Sosna ” was not applicable, because the plaintiffs in Cruz had not obtained class certification. Cruz, 252 F.3d at 534. At the same time, Cruz did not address the footnote in Sosna explaining the “relation back” idea. Furthermore, no First Circuit decision has considered the question of whether it would be proper to use the “relation back” approach in the context of § 216(b).FN2

In the Court’s view, applying the “relation back” doctrine is appropriate in this case. Plaintiff represents he has not yet moved for preliminary certification because he has been busy opposing Defendants’ efforts to transfer venue and dismiss the case, which they commenced less than a month after the Complaint was filed. Under the “relation back” doctrine, the opt-ins who appeared after Plaintiff rejected the Rule 68 offer sustain jurisdiction; this will give Plaintiff the opportunity to seek provisional certification without “undue delay” after the entry of this Order. Sandoz, 553 F.3d at 921 (quoting Weiss, 385 F.3d at 348). This, in turn, will enable “due deliberation” on the issue of whether Plaintiff is the appropriate representative of a collective action. See Weiss, 385 F.3d at 348.”

Last, the Court noted that policy precludes a dismissal due to mootness under these circumstances, because of the remedial purposes of the FLSA:

“As discussed, and as Judge Almond noted, granting dismissal in these circumstances would impair the Congressional preference for collective actions embodied in 216(b). The Court offers some additional comments on this topic below. But there is also a second policy consideration that favors affirming the R & R. Specifically, the present motion underscores the unique danger of tactical manipulation in FLSA cases. Thus, as explained below, to the extent Cruz could be read to establish a broad mootness regime that reaches beyond the Rule 23 context, an exception for FLSA actions is warranted.

To begin with, it is clear that allowing Defendants to “pick off” named FLSA plaintiffs one-by-one encourages manipulation of cases and ultimately of the federal courts. See Sandoz, 553 F.3d at 919. One court in Illinois described the ways employers can hamstring collective actions if allowed to snuff named plaintiffs’ claims using Rule 68:

[The] defense strategy creates a virtually unwinnable situation for plaintiffs in collective or class action lawsuits. Defendant makes an offer of “judgment” to Plaintiff, then alleges that the action is moot. Plaintiff therefore must either pursue discovery very early in the case, when a court likely will deem it premature, or seek class certification and/or notice before discovery, which runs the risk of harming the interest of those as-yet undiscovered class members. Reed v. TJX Cos., NO. 04 C 1247, 2004 WL 2415055, at *3 (N.D.Ill. Oct. 27, 2004). The FLSA enforcement scheme clearly does not envision such a minefield. Section 216(b) does not require plaintiffs to petition for provisional certification of a “collective action” when filing a complaint. In fact, the final ruling on whether the named plaintiff may maintain a “collective action” usually occurs “after discovery is complete.” Poreda, 532 F.Supp.2d at 239. The collective action process “should be able to ‘play out’ according to the directives” of § 216(b) and the cases applying it, to permit “due deliberation by the parties and the court” on collective action certification. See Weiss, 385 F.3d at 347-48 (discussing the Rule 23 process).

The moot-and-dismiss tactic also facilitates forum-shopping and plaintiff-shopping. At oral argument, Defendants confirmed that multiple lawsuits regarding the overtime claims asserted here are pending in different jurisdictions around the country. Permitting use of Rule 68 to moot cases in one or more forums and thereby cherry-pick another, potentially with the weakest collective action representative, upends the longstanding principle that, in cases based on federal-question jurisdiction, the plaintiff is the “master of the claim.” Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987).

Defendants might object that Rule 23 actions present the same worries. After all, Rule 23 advances a policy similar to § 216(b): the efficient resolution of widespread small claims dependent on common legal and factual questions. Arguably, the opt-out structure of Rule 23 embodies an even firmer commitment to aggregating claims, in contrast to the opt-in rule for § 216(b) cases. And if this is true, how can the cited policies provide any basis to distinguish Cruz, where the same concerns were not enough to stave off dismissal of a Rule 23 action? In that case, the plaintiffs alleged, there was a large pool of class members, and the defendant had defused class action litigation by mooting the claims of the named parties. See Cruz, 252 F.3d at 535.

The answer to the question above is that FLSA actions are more vulnerable to manipulation than Rule 23 actions. For the latter, filing a complaint tolls the statute of limitations for all alleged class members, whether they know of the lawsuit or not. See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345, 350 (1983) (“The filing of a class action tolls the statute of limitations as to all asserted members of the class ….”). In contrast, parties alleged to be “similarly situated” in a § 216(b) case must affirmatively opt in to toll the limitations period. See29 U.S.C. § 256 (explaining that an FLSA action is not considered to be commenced for a similarly situated party until he submits written consent to join the case); Bonilla v. Las Vegas Cigar Co., 61 F.Supp.2d 1129, 1136-37 (D.Nev.1999) ( “[A]ll potential plaintiffs to § 216(b) actions must file their consent to the suit to toll the statute of limitations.”) (emphasis in original).

This means that defendants can bleed value out of a large pool of outstanding FLSA claims in a way they cannot with a comparable group of Rule 23 claims. “Picking off” § 216(b) plaintiffs delays the point at which any collective action can be provisionally certified. This stalls notification to potential “ similarly situated” parties. O’Donnell v. Robert Half Int’l, Inc., 534 F.Supp.2d 173, 177 (D.Mass.2008) (“A class may be conditionally certified and notified of the pendency of an action only if the putative class members are “similarly situated” with the named plaintiffs.”) The longer it takes for an FLSA class to mature, the lower members’ damages will be once they opt in, given the two-year limitations period. See29 U.S.C. § 255 (2010). In a parallel situation under Rule 23, the clock for absentees stops upon the filing of a complaint that raises their claims. Thus, even if employers pick off some named plaintiffs, the limitations period for absentees pauses while any applicable class action is pending.

The predicament of the opt-ins in this case brings the problem into sharper focus. Widespread claims involving common issues invite lawsuits in different jurisdictions, as is the situation here. Note the disparate outcomes this creates for Rule 23 absentees and FLSA opt-ins. As a practical matter, if a Rule 23 action is dismissed, class members may not have to worry about expiration dates for their claims drawing closer. If there is another class action underway that allegedly embraces their claims, the automatic tolling rule from Crown, Cork & Seal shelters them. Opt-ins to collective actions enjoy no such protection. If the suit to which they have hitched their claims sinks-the result Defendants seek here-the clock starts running again, even if they might be “similarly situated” to the named plaintiff in another pending case. Thus, as Judge Almond observed:

[I]f [Defendants were] successful in dismissing the case as mooted, the four plaintiffs who opted in … would arguably have to either initiate new individual FLSA actions or join another applicable collective action. Thus, the tolling of the limitations period for their claims could be delayed and, if they were ultimately successful, their back pay damages could be reduced since the value of their claims is potentially diminished with each passing day. (R & R at 4-5.) The point is that FLSA opt-ins are more exposed to the erosion and possible expiration of their claims than Rule 23 absentees.

Simply put, it is easier to drown collective actions than class actions. If allowed to use Rule 68 as a weapon, defendants can torpedo complaint after complaint, leaving opt-ins to swim for the nearest viable action as their claims leak value. This justifies a more relaxed mootness standard in FLSA cases than Rule 23 cases, and therefore provides an additional basis for distinguishing Cruz.”

The case was before the Court on Defendant’s interlocutory appeal, challenging the reasoning of the lower Court in granting class certification on Plaintiff’s California state law claims. The dispute centered around whether the lower court abused its discretion in finding that the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) was satisfied, based-in large part-on an employer’s internal policy of treating its employees as exempt from overtime laws. The Ninth Circuit, remanded for further factual findings, holding that while such uniform exemption policies are relevant to the Rule 23(b)(3) analysis, it is an abuse of discretion to rely on such policies to the near exclusion of other relevant factors touching on predominance.

The question here is whether the district court abused its discretion in finding Rule 23(b)(3)‘s predominance requirement was met based on Wells Fargo’s internal policy of treating all HMCs as exempt from state and federal overtime laws. To succeed under the abuse of discretion standard, Wells Fargo must demonstrate that the district court either (a) should not have relied on its exemption policy at all or (b) made a clear error of judgment in placing too much weight on that single factor vis-a-vis the individual issues.

The first line of attack, that Wells Fargo’s exemption policy was an impermissible factor, is a non-starter. An internal policy that treats all employees alike for exemption purposes suggests that the employer believes some degree of homogeneity exists among the employees. This undercuts later arguments that the employees are too diverse for uniform treatment. Therefore, an exemption policy is a permissible factor for consideration under Rule 23(b)(3).

Wells Fargo’s arguments are better construed as a challenge to the weight accorded to the internal exemption policies under the third abuse of discretion prong: mulling the proper factors but committing clear error in weighing them. To analyze this question, we first ask how much weight the district court gave to the exemption policy. Plaintiffs suggest the weight was minimal; Wells Fargo claims that the district court’s reliance was tantamount to estoppel.

A review of the California certification order lends substantial credence to Wells Fargo’s position. Although the court’s analysis of each exemption was careful and considered, its ultimate decision was clearly driven by Wells Fargo’s uniform exemption policy. Indeed, the court found “serious issues regarding individual variations among HMC job duties and experiences” but nevertheless concluded that common questions predominated because “it is manifestly disingenuous for a company to treat a class of employees as a homogenous group for the purposes of internal policies and compensation, and then assert that the same group is too diverse for class treatment in overtime litigation.”E.R. 17. As such, we must conclude that the district court’s reliance on Wells Fargo’s internal exemption policy was substantial.

This leads to the central question: whether such heavy reliance constituted a clear error of judgment in assaying the predominance factors. District courts within this circuit have split on the relevance of exemption policies. The district court relied primarily on Wang v. Chinese Daily News, Inc., 231 F.R.D. 602, 612-13 (C.D.Cal.2005), which found predominance of common issues based on an employer’s policy of treating all employees in a certain position as uniformly exempt from overtime compensation requirements. In contrast, another district court has expressed doubt about Wang, and found that uniform exemption policies are merely a minor factor in the predominance analysis. See Campbell v. PricewaterhouseCoopers, LLP, 253 F.R.D. 586, 603-04 (E.D.Cal.2008) (rejecting “estoppel” position of Wang ).

Viewed in light of these principles, the rule espoused in Wang has little justification. Wang essentially creates a presumption that class certification is proper when an employer’s internal exemption policies are applied uniformly to the employees. Such an approach, however, disregards the existence of other potential individual issues that may make class treatment difficult if not impossible. Indeed, this case is a prime example, as the district court identified “serious issues regarding individual variations” that were not susceptible to common proof, but nevertheless felt compelled to certify the class.

Of course, uniform corporate policies will often bear heavily on questions of predominance and superiority. Indeed, courts have long found that comprehensive uniform policies detailing the job duties and responsibilities of employees carry great weight for certification purposes. Damassia v. Duane Reade, Inc., 250 F.R.D. 152, 160 (S.D.N.Y.2008) (“Where … there is evidence that the duties of the job are largely defined by comprehensive corporate procedures and policies, district courts have routinely certified classes of employees challenging their classification as exempt, despite arguments about ‘individualized’ differences in job responsibilities.”). Such centralized rules, to the extent they reflect the realities of the workplace, suggest a uniformity among employees that is susceptible to common proof.

But Wells Fargo’s blanket application of exemption status, whether right or wrong, is not such a rule. In contrast to centralized work policies, the blanket exemption policy does nothing to facilitate common proof on the otherwise individualized issues.

To illustrate, consider the federal outside salesperson exemption. This exemption applies where, among other things, the employee is “customarily and regularly away from the employer’s place of … business….”29 C.F.R. § 541.500(a). Often, this exemption will militate against certification because, as the district court noted, it requires “a fact-intensive inquiry into each potential plaintiff’s employment situation….” E.R. 11. A centralized policy requiring employees to be at their desks for 80% of their workday would change this individual issue into a common one. Therefore, such a corporate policy would be highly relevant to the predominance analysis. A uniform exemption policy, however, has no such transformative power. Whether such a policy is in place or not, courts must still ask where the individual employees actually spent their time. As one court succinctly explained, “[t]he fact that an employer classifies all or most of a particular class of employees as exempt does not eliminate the need to make a factual determination as to whether class members are actually performing similar duties.” Campbell, 253 F.R.D. at 603.

In short, Wells Fargo’s uniform exemption policy says little about the main concern in the predominance inquiry: the balance between individual and common issues. As such, we hold that the district court abused its discretion in relying on that policy to the near exclusion of other factors relevant to the predominance inquiry.”

Plaintiffs filed this action against Defendant for violation of various state and federal labor laws. Before the Court was Plaintiffs’ Unopposed Motion for Preliminary Approval of Settlement of their hybrid action, which consisted of both a Federal Rule of Civil Procedure 23(b)(3) class action and a Federal Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b), collective action. Though the Motion was essentially unopposed, the parties did disagree as to one issue pertaining to release of claims by currently absent parties, regarding notice required to the class members (Defendant proposed an opt-out Rule 23 notice alone). The Court resolved that dispute by ordering that the parties’ existing agreement and forms be modified to provide both “opt-out” procedures as allowed under Rule 23 and “opt-in” procedures as required by the FLSA.

Explaining that opt-in notice as well as opt-out notice must be provided to class members in such a hybrid action, the Court stated, “According to Defendants, the Rule 23 opt-out procedures, under which potential plaintiffs are bound by the terms of the settlement unless they affirmatively opt out, should apply to both the state law claims and to those claims arising under the FLSA. Plaintiffs disagree arguing that, while Rule 23 applies to their state law claims, the FLSA requires potential plaintiffs to opt-in to this action in order to release any claims they may have under the FLSA. The Court agrees with Plaintiffs.

In a collective action brought under the FLSA, “[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”29 U.S.C. § 216(b). Congress enacted this provision for the purpose of “limiting private FLSA plaintiffs to employees who asserted claims in their own right and freeing employers of the burden of representative actions.” Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 173 (1989).

In Kakani v. Oracle Corp., the Northern District examined the relationship between the two regimes and held that the use of “opt-out” notice would violate the FLSA.2007 WL 1793774, at *7 (N.D. Cal. June 19, 2007). That court stated that it would have been “unconscionable to try to take away the FLSA rights of all workers, whether or not they choose to join in affirmatively.”Id. (emphasis in original).

Defendants’ authority to the contrary is inapposite. First, Defendants cite Hoffman-La Roche Inc. for the proposition that district courts possess discretion over the procedural methods used to join multiple parties in a single case. However, Defendants interpret Hoffman-La Roche too broadly. That case merely established that district courts may authorize notification of potential plaintiffs regarding the opportunity to “opt-in” to a collective action. 493 U.S. at 169. Hoffman La Roche does not stand for the proposition that this Court may substitute Rule 23 “opt-out” notice for the “opt-in” notice expressly required by 29 U.S.C. § 216(b).

This case was before the Court on Defendant’s motion to dismiss or strike count II of Plaintiffs Complaint, which alleged overtime law violations pursuant to the New Jersey Wage Law (“NJWL”). The Court denied Defendant’s motion, explaining that it was premature at the pleading stage. This case is of note, because there is conflict of authority within the 3rd Circuit, as to whether Rule 23 “opt-out” classes and 216(b) “opt-in” classes can ever be brought together, or whether the Court should necessary deny its inherent supplemental authority necessarily in such cases.

“The underlying Complaint in this case is a putative class claim, filed by Plaintiff, contending that Freedom violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. and the New Jersey’s Wage Law (“NJWL”), N.J.S.A. 34:11-56a et seq. by improperly classifying mortgage loan officers to prevent them from receiving overtime pay for work in excess of 40 hours a week. In its motion to dismiss Plaintiff’s NJWL claim, Freedom argues that Plaintiff’s FLSA and NJWL claims are legally incompatible. This Court concurs with and adopts Judge Linares’ reasoning in Freeman v. Hoffman-Laroche, Inc. No. 07-1503, 2007 U.S. Dist. LEXIS 92589, at * 70*10 (N.J.D. Dec. 18, 2007), determining that dismissal of a cause of action under NJWL solely for “inherent incompatibility” with FLSA is not appropriate.

Freedom’s additional argument is that the Court should dismiss Count II because Plaintiff cannot establish the “superiority” test required for class certification under Federal Rule of Civil Procedure 23(b)(3). The Court holds that this argument is premature. The parties have conducted no discovery. No motions for class certification have been filed. The Court will be in a much better position to address this issue at the class certification stage.”